Research gathered from Legal & General; parents are gifting deposits for their children now more than ever before. The gift so much now that it the “Bank of Mum & Dad” was a bank it would be one of the top 10 biggest lenders in the UK.
The average parental gifted deposit in the UK is now up to £24,000. Gifts also come from other family members, including grandparents, as their wealth sometimes skips a generation. Thousands of homebuyers every year are reliant on their families to either get onto the housing ladder in the first place or upgrade to a larger, more beneficial home.
Gifts are vital to the workings of the market and make a significant difference. If they were not accessible; the property market could be very different from how we know it and not for the better.
According to the research gathered, almost 20% of parents who had helped their children buy, did so because they felt it was their responsibility as a parent to help.
Property price rises have outstripped wage increases over the years, putting purchasing a first home out of reach for many, especially if there is only one income bringing in a level of financial stability into the household. It can be a challenge saving for a deposit and having to cover the costs of bills and rent. Some end up Moving Home in Middlesbrough and back in with their parents for a while in the run-up to moving to help with savings.
Of the back of the survey, Legal and General warned that parents’ generosity could impact their standard of living in retirement. Based on their survey of 1600 parents who had helped their children, most were gifting from their savings. Slightly more worrying, though was that many were withdrawing from their pension schemes or their equity.
Effectively this is them “fast-forwarding” their child’s inheritance.